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In June 2016, the US Court of Appeals for the District of Columbia Circuit ruled to uphold the Federal Communications Commission's (FCC's) reclassification of Internet service providers (ISPs) as "common carriers." This is a major milestone because it allows providers to be regulated under Title II of the Communications Act and opens them up to net neutrality rules.However, several major broadband operators complain that this ruling could damage their businesses and are vowing to appeal the decision.

A lack of regulation has led to a lack of choice for US consumers and net neutrality gaining prominence

According to the FCC's most recent Internet access service report, on average, households can only choose between two or three broadband providers to deliver minimum speeds of 3Mbps, while 6% of households can still only access broadband from one provider. This lack of choice in the US broadband market has not only resulted in higher prices, but also led to providers being able to supress or block certain services. Understandably, net neutrality has gained considerable prominence and the FCC has for some time been exploring ways to prevent providers from creating fast and slow lanes on the Internet.

However, until recently, broadband providers were only defined as information services, which reduced the FCC's regulatory authority over them, and two previous attempts made by the FCC to create net neutrality rules were therefore overturned. However, since 2015, the Open Internet Order has reclassified them as telecommunication services (or common carriers) and defined high-speed Internet as an essential utility that should be available to all. The Court of Appeals has upheld this reclassification, which opens up the fixed and mobile market to the possibility of greater regulation in areas in which it has been lacking.

The FCC now has the authority to introduce more consumer protection legislation, including net neutrality rules, and greater privacy regulations, including a recent proposal to introduce a framework for consent for ISPs to use customer information.

To guarantee access to online services, the FCC will need to focus on increasing competition and maintaining transparency in the market. For example, the introduction of transparency obligations in relation to traffic management techniques, combined with easy processes for consumers to switch providers, has generally been effective in other countries to maintain a good level of openness of the Internet. This approach is flexible and allows for a fast response to market changes.

Several major broadband operators, including AT&T, have already signaled their intention to challenge the reclassification in the Supreme Court and argue that net neutrality regulations go beyond the FCC's authority. However, it seems unlikely that any challenge by operators would be successful because broadband is widely accepted around the world as a telecoms service and there are no similar disputes over its definition elsewhere.


Further reading

"US telcos are unlikely to be significantly affected by the FCC's transparency proposal," TE0007-001005 (March 2016)

"Court ruling gives the FCC a chance to rethink its approach to net neutrality," TE009-001051 (January 2014)


Sarah McBride, Analyst, Regulation

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